BOARD GENDER DIVERSITY: A PATH TO ACHIEVING SUBSTANTIVE EQUALITY IN THE UNITED STATES.

• Author: Houser, Kimberly A.

TABLE OF CONTENTS INTRODUCTION 500 I. WHY THE UNITED STATES LAGS BEHIND IN GENDER DIVERSITY 508 A. Individual Bias: The Brain 509 1. Stereotypes About Competence 509 2. Unconscious Biases 511 B. Institutional Bias: The Process 514 1. Narrowly Defined Pool 515 2. Network Homophily 517 C. Cultural Bias: The Way of Life 519 II. INSTITUTIONAL ACTIVISM AS A SIGN OF CULTURAL CHANGE? 523 A. Shareholder and Investor Initiatives 523 B. Nasdaq Listing Requirements 525 C. State Investment Funds 526 D. Backlash to Activism 528 III. UNITED STATES LEGISLATIVE EFFORTS TO INCREASE BOARD DIVERSITY 529 A. California SB 826 529 B. Nonbinding State Resolutions 531 C. Backlash to Legislation 533 IV. ANALYSIS OF EU APPROACH TO IMPROVING BOARD DIVERSITY 537 A. Legislative 540 B. Cultural 544 C. Constitutional 548 V. PROPOSAL FOR SUBSTANTIVE EQUALITY IN THE UNITED STATES 551 CONCLUSION 560 "Women belong in all places where decisions are being made." Ruth Bader Ginsburg, U.S. Supreme Court Justice (1)

INTRODUCTION

While gender equality is a fundamental right in most industrialized nations, true substantive equality has not been attained in the United States. (2) Our focus on substantive equality acknowledges that even with an antidiscrimination framework that establishes equality before the law, historical disadvantage continues to shape outcomes for women, racial and ethnic minorities, and other subordinated groups. (3) In 2020, the United States ranked 53 out of 153 countries on the Global Gender Gap Index with 17 out of 27 European Union (EU) member states scoring higher and 5 of those in the top 10. (4) As member states in the EU continue to make progress, women in the United States have failed to make substantial inroads in important decision-making roles in politics, business, and other seats of power.

The United States has rapidly been losing its status as a global power founded on democratic principles due to its leadership's active involvement in reducing the rights of women, Black people, and other marginalized groups. (0) Women in the United States are still paid less than men for the same jobs, have little recourse when discriminated against, even when the discrimination is overt, and have been kept out of important economic and political decisionmaking roles for hundreds of years. (6) Many argue that a limited pipeline of available talent explains the underrepresentation of women on boards and other leadership positions in the United States. (7) In reality, a deeply ingrained culture of exclusion, along with continuing institutional- and individual-level bias, are the primary reasons women continue to be marginalized. (8)

The federal government has no national policy to address this deficiency (9) nor does it have a constitutional requirement to do so according to the U.S. Supreme Court. (10) In fact, the previous administration attempted to roll back women's rights. (11) While the European Union was founded on a set of values and fundamental rights, including gender equality, (12) the founders of the United States did not consider women their equals, establishing women's status as inferior to men. (13) The U.S. Constitution created a legal system in which women were not afforded citizenship, (14) were prevented from owning property, (15) did not have the right to vote, (16) could not sit on a jury (1)' or practice law, (18) and were considered dependents--and in some situations property--of white males. (19)

Although women in the United States have made progress since the Constitution was written, the legal system continues to place obstacles in the way of true equality. (20) Should things continue with business as usual in the United States, it will take thirty years for women to achieve parity on corporate boards, eighty years to achieve parity in CEO positions, and one hundred years to achieve parity in Congress. (21) An alarming finding of the World Economic Forum's Global Gender Gap Report, which measures progress toward gender equality around the world, is that in 2018, the closing of the gap slowed down--significantly. (22) The concern is great among women leaders, some of whom have written an open letter stating that it is of utmost importance to "reinvest in policies and in legal and social frameworks that will achieve gender equality and inclusion." (23) While multiple reasons have been given for the slowdown, a major concern is the recent increase in world leaders publicly denigrating women. (24)

In this Article, we examine the way in which laws and initiatives designed to increase the participation of women on corporate boards reflect how the EU and United States fundamentally differ in their views of gender equality. The dominant perspective in the United States is that women and men have an equal opportunity because the Equal Protection Clause of the Fourteenth Amendment and the Civil Rights Act of 1964 provide protection, even though substantive equality has never been achieved. (25) While there are proponents and opponents of the revived Equal Rights Amendment (ERA), we agree with Ruth Bader Ginsburg's pronouncement that "I would like to see a new beginning. I'd like it to start over." (26)

One of the reasons women have been prevented from making inroads into important decision-making roles in the United States is that the U.S. Constitution, while riddled by a troubled history of discrimination, offers no support for substantive gender equality. (27) The ERA, as currently worded, will not achieve the substantive equality many of its proponents believe it will because it is based on an antidiscrimination framework that focuses on individualized harms rather than systemic change. (28) More specifically, the anticlassification approach of the ERA would prevent use of laws that permit or require positive action. (29) The need for positive action is based on an antisubordination model that places obligations on public and private bodies to address the disparities in their ranks. (30) Those who fully buy into false notions of meritocracy and equal opportunity reject the idea of positive action and opine that men dominate leadership positions because they are more qualified and women simply lack the interest or required skill set. (31) However, a growing body of research shows that the opposite is actually true. In many cases, women provide leadership that better serves the well-being of their constituents relative to men.' (32) For example, had women been at the helm of major corporations in the 1990s, we may not have seen the corporate greed and unethical behavior that caused trillions in lost investments and the passage of the Sarbanes-Oxley Act; (33) we may not have seen the foreclosure crisis of 2006 that sank the global economy into a great recession; (34) and the United States likely would not have seen the major loss of life due to the individualistic style of leadership present with respect to COVID-19. (35)

Not only do women on boards bring a different perspective to decision-making, but research also suggests that their presence makes the men on their teams process information more thoroughly, so they are more reflective and open-minded. (36) This heterogeneity leads to a smarter and better informed decision-making process, and also prevents problematic groupthink that contributes to unethical and destructive decisions. (37) Thus, including more women in important decision-making roles is crucial not only for equity and moral reasons, but also will lead to better outcomes. (38)

As used herein, the term Board Gender Diversity (BGD) means that the board of a publicly held company contains a certain minimum percentage of women. (59) We use BGD as a proxy for economic decision-making power, which we argue is fundamental for women to make inroads into economic equality while understanding that this is just a first step. In Part I, we provide an overview of board representation in the EU and United States and discuss the individual, institutional, and cultural forces that continue to keep women on the sidelines. In Part II, we discuss recent institutional activism that may be a sign of broader cultural change. In Part III, we examine U.S. legislative efforts, including California SB 826, the first and only law in the United States to require board diversity. In Part IV, we review the EU approach to increasing BGD by examining legislative, cultural, and constitutional factors. And in Part V, we build on our comparative analysis of the U.S. and EU models and propose that positive action is necessary to achieve meaningful and sustainable gender equality in the United States.

Our analysis reveals that BGD requirements have been used more effectively in the EU than in the United States because the EU member states have constitutional amendments that have paved the way for positive action. (40) Although calls for adopting the Equal Rights Amendment in the United States have resurfaced, we do not believe the language contained therein is sufficient, nor will it have the effect hoped for by those promoting it. (41)

1. WHY THE UNITED STATES LAGS BEHIND IN GENDER DIVERSITY

   The percentage of women on boards in the Russell 3000 index (R3000), which includes many of the public companies in the United States, hovers around 20 percent. (42) Despite the availability of qualified female board candidates, few are selected using current selection methods, which predominantly feature the appointment of men known to men occupying current positions on boards. (43) These statistics demonstrate that the well-known reference to the "old [boys'] club" is alive and well. (44) As of 2018, a staggering half of the companies on the R3000 had no women directors or only one woman on their boards. (45) The R3000 is an index fund consisting of about 98 percent of all publicly held companies incorporated in the United States. (46) Additionally, 80 percent of the top twenty-five initial public offerings in the United States...